KPMG’s Week in Tax: 10 - 14 October 2022

Tax developments or tax-related items reported this week include the following.

• Belgium: The federal government reached an agreement on the budget for 2023 and 2024, which includes a “windfall profits tax” on energy producers and a minimum tax of 15% for companies with profits above €1 million.
• Czech Republic: An extension of the excise movement and control system (EMCS)—a computerised system for monitoring the movement of excise goods within the EU—will now include the movement of selected products between EU Member States under a duty suspension arrangement. 
  
• Czech Republic: The government published a first draft of proposed legislation implementing amendments regarding cross-border conversions, mergers and divisions, and Directive (EU) 2019/1151 as regards the use of digital tools and procedures in company law.
• Lithuania: The Court of Justice of the European Union (CJEU) held that a supply recipient has the right to deduct VAT even though the supplier did not pay output VAT because of financial difficulties.

Read TaxNewsFlash-Europe

• Nigeria: The Court of Appeal (Lagos) held that value added tax (VAT) is the principal tax on consumption of goods and services in Nigeria and thus supersedes any similar state law, including the Lagos State hotel occupancy and restaurant consumption law.
• Nigeria: The president presented the federal government’s budget proposals for 2023.

Read TaxNewsFlash-Africa

• Mexico: The tax authority of the State of Nuevo Leon published changes to reporting for payroll tax purposes—effective 1 October 2022—as well as a payroll tax reporting manual.

Read TaxNewsFlash-Americas

• Bahrain: Entities conducting one or more relevant activities for economic substance purposes must file their economic substance return for FY 2021 by 11 November 2022. 
• Bahrain: The National Bureau for Revenue (NBR) updated their VAT registration guideline, and issued a new decision for the digital stamp scheme.
• Hong Kong: A revenue order incorporates into Hong Kong’s domestic law the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI)—along with the notifications and reservations under the MLI applicable to Hong Kong. The earliest possible effective dates of the MLI for Hong Kong are 1 April 2023 (for taxes withheld at source) or 1 April 2024 (for other taxes). 
• India: The Bombay High Court held that an appellant can pay 10% of the disputed tax using either the amount available in the electronic cash ledger or the amount available in the electronic credit ledger.

Read TaxNewsFlash-Asia Pacific

• Australia: Treasury released a consultation paper on Australia’s participation in the OECD’s BEPS 2.0 project, focused on the global anti-base erosion (GloBE) rules under Pillar Two—including implementation of a domestic minimum 15% tax.
• United States: KPMG reports discuss the merits of the arm’s length principle and the significant problems with global formulary apportionment—the perceived alternative—and consider the effect that the BEPS 2.0 project and other OECD initiatives may have on the future of transfer pricing.

Read TaxNewsFlash-Transfer Pricing

• United States: The IRS updated the “frequently asked questions” (FAQs) on the qualified intermediary (QI), withholding foreign partnership (WP), and withholding foreign trust (WT) FAQs website, under the heading “Certifications and Periodic Reviews.”
• United States: “Sponsoring entities” that have not registered any sponsored foreign financial institutions (FFIs) or sponsored direct reporting non-financial foreign entities (NFFEs) in the FATCA registration system will be contacted by a message posted on their FATCA registration system message board. If no action is taken within 60 days of notification, the entity will be removed from the published FFI List and may be subject to 30% withholding.
• OECD: A crypto-asset reporting framework (CARF) includes proposed amendments to the common reporting standard (CRS) for the automatic exchange of financial account information among countries.

Read TaxNewsFlash-FATCA / IGA / CRS

• Final regulations amend existing regulations under section 36B regarding eligibility for the premium tax credit (PTC) to provide that affordability of employer-sponsored minimum essential coverage for family members of an employee is determined based on the employee’s share of the cost of covering the employee and those family members, not the cost of covering only the employee.
• Notice 2022-41 allows a participant in a section 125 “cafeteria plan” to revoke or modify, during a period of coverage, an election under the plan for family coverage under a group health plan (other than a flexible spending arrangement (FSA)) in order for one or more family members to enroll in a qualified health plan (QHP) through a health insurance exchange in the individual market.
• Rev. Proc. 2022-19 describes procedures that allow S corporations and their shareholders to resolve frequently encountered issues with certainty and often without requesting a private letter ruling (PLR).
• The IRS expanded the dyed diesel fuel penalty relief due to continued disruptions resulting from Hurricane Ian in Florida to include any person that sells or uses dyed diesel fuel for highway use. Previously the relief was only available to any person that sells or uses dyed diesel fuel in an emergency vehicle for highway use.
   

State and local tax

• Colorado: The state tax authority issued a private letter ruling addressing the taxation of streaming platform credits. The taxpayer, a streaming platform, allowed viewers of its streaming content to purchase so-called platform credits, which could be used to show support for a particular streamer and allowed the viewer enhanced interaction with streamers. The ruling concluded that no sales tax was due when the company sold platform credits or when they were redeemed by the purchaser.
• Illinois: The Department of Revenue announced an extension of the corporate income tax return due date to 15 November 2022 (from 17 October 2022), for taxpayers with a tax year ending 31 December 2021.
• New York: An administrative law judge (ALJ) held that a taxpayer providing customers with reports about activity relating to emails the customers sent to their prospective clients was selling nontaxable information services, rather than taxable prewritten computer software.
• Oregon: The City of Portland amended its business license tax law to adopt market-based sourcing effective for tax years beginning on or after 1 January 2023. Although the amendment has been approved, it will not take effect until substantially similar provisions are adopted by the governing bodies of Multnomah County and Metro.
• South Dakota: The South Dakota Supreme Court held that the deduction for federal taxes under the state’s bank franchise tax law is limited to the amount of taxes actually paid or an entity’s actual tax liability—and not simply total income multiplied by the applicable tax rate.
• Washington State: All businesses that report apportionable income on timely filed Washington State combined excise tax returns in 2021 may need to file the Annual Reconciliation of Apportionable Income Form (ARAI) by 31 October 2022, even when the reconciliation results in a “no change” return.  

Read TaxNewsFlash-United States

• The Office of the U.S. Trade Representative (USTR) announced the next steps in the statutory four-year review of the tariff actions in the Section 301 investigation of China’s acts, policies, and practices related to technology transfer, intellectual property, and innovation following requests for continuation from representatives of domestic industries. The USTR also issued notices with conforming amendments to legal note provisions in the Harmonized Tariff Schedule of the United States (HTSUS) and technical amendments to certain previously reinstated exclusions associated with the Section 301 investigation.
• U.S. Customs and Border Protection (CBP) will provide duty-free treatment of eligible infant formula base powder entered or withdrawn from warehouse for consumption on or after 13 October 2022, through 31 December 2022. The duty-free treatment is limited to eligible infant formula base powder exported to the United States on or before 14 November 2022.
• The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) published a general license—Authorizing certain administrative transactions prohibited by Directive 4 under Executive Order 14024—issued pursuant to the Russian harmful foreign activities sanctions regulations.
• A virtual currency exchange based in Bellevue, Washington agreed to remit over $24 million and $29 million for apparent violations of multiple sanctions programs and anti-money laundering obligations.

Read TradeNewsFlash-Trade & Customs

The items described above are also reported as editions of TaxNewsFlash:

• Indirect Tax
• Taxation of the Digitalized Economy
• Tax Dispute Resolution
• Tax Developments Relating to Coronavirus (COVID-19)